After Fed raised interest rates the first time in four years, what will happen to the financial products each of us possess? Kiplinger's Personal Finance provides a useful sum-up.
- For adjustable-rate mortgage (ARM) owners, rate increase is due at next adjustment time. For borrowers with LIBOR as rate index, the change is already build into the rate before Fed announcement.
- For people looking for a mortgage, hybrid ARMs with five to ten years' fixed interest rate are recommended (choose the period that reflects how long you expect to be in that home). Be sure to lock in the rate when you are about to purchase.
- For HELOC owners, the interest rate will increase in one to two billing cycles and minimal monthly payment will change accodingly.
- For credit cards, although 65% of all cards have a variable rate, a quarter point hike will not push the rate above the floor, so there should be no immediate change unless Fed raises interest rate several times later. Issuers are unlikely to adjust fixed rate cards in this competitive market.
- For people searching for a new car, auto-financing rates are unlikely to change due to competition.
- For saving in money-market funds, rate will reflect the quarter point change in several months.
- For CD savers, one will likely see a rate increase the next time CD is renewed.
- For saving bonds, EE series bonds are recommended because they historically yield two percentage points over inflation (andwill outperform I series bonds in the long run)